I'm a fanatic about low-cost index fund and ETF investing. I've authored six books on the subject, founded the low-fee investment firm Portfolio Solutions to help people invest in these products, and started a website on low-cost investing at www.RickFerri.com. Index funds and low advisor fees provide investors’ with the best chance for personal financial success. John Bogle, the founder of Vanguard, is my personal hero, and that makes me a bona fide "Boglehead". Portfolio Solutions, manages portfolios for individual clients with $1 million using John Bogle’s investment principles.
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Investing Well Is Like Baking An Award-Winning Cake

Managing a successful investment portfolio is like baking a State Fair award-winning cake. They both require high-quality ingredients, mixed in the right amounts, and discipline when baking. Decorating is important too, although no amount of frosting will cover-up marginal ingredients or careless baking.

In successful cake making, select the best ingredients, mix them together and pour into the right size pan, bake at the right temperature and for an appropriate time, frost and decorate to add flavor and eye appeal. The only thing left is biting into the delicious treat.

If you botch the ingredients, select the wrong pan size, or mess up the oven settings, you’ll have a bad outcome. No amount of decorating will cover up these mistakes when you sink your choppers in.

In portfolio management, success come from selecting the right mutual funds, mixing asset classes together to create the right level of risk based on your needs, placing each mix in an appropriate account to reduce taxes, and letting it sit for a desired time horizon. When it’s done, enjoy the results.

Poor mutual fund choice, inappropriate asset allocation, the wrong risk level, inefficient tax management, and an unwillingness to let time do its magic will result in a less than desirable outcome. Decorating a poorly-managed portfolio with the latest hot funds or investment gimmicks will do nothing to change the problems that have already been created.

The problem with many portfolios is that too much time is spent trying to decorate a failed strategy rather than following a successful recipe from the start. Investors find their portfolio performance improves significantly when they concentrate on baking rather than decorating.

Some suggestions for baking improvement are: switch to low-cost index funds and exchange-traded funds (ETFs) and away from higher cost, actively-managed funds; select a long-term asset allocation rather than trying to time the market for buying and selling opportunities; make use of tax-deferred and tax-free accounts; and let the magic of compounding work over your time horizon.

You may decide to hire an adviser and that might be helpful, although I caution you in your search. There are many more cake decorators than there are quality bakers among the thousands of registered advisers.

Advisers tend to cover up their lack of baking skills with an abundance of decorating. They’ll swap into hot investments and sell their failed picks right before a reporting period, tell you they can time markets even though they can’t, use inappropriate benchmarks to measure portfolio performance so they look good, etc. Make sure you investigate thoroughly and choose wisely.

Choose the right recipe for portfolio success. Select low-cost index funds to represent asset classes, mix those asset classes to your needs, place them in proper accounts for the best tax efficiency, and let the magic of compounding do its thing. If you’re looking for help, choose a low-cost adviser who will help you achieve the highest probability of meeting your financial goals. Your portfolio can be a next State Fair award winner!

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